Episode Transcript
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Speaker 1 (00:00):
Good morning, and welcome to the Capital District's Money and
Investment program. You're listening to the Fagan Financial Report. I'm
Dennis Fagan, sitting here with my son Aaron, as we
do every Sunday right here our news talk A ten
on one oh three one w G. Why we're actually
putting this recording together Friday morning. The markets as experienced
a couple of good days since the conclusion of the election.
And you know, whether it's the outcome the UH or
(00:23):
just the fact that there was an outcome, you know,
I think I think time will tell, but the market,
we'll we'll talk some this morning about what a Trump
victory might mean for the market, policies and the like,
what it might mean for interest rates. We also have
the FED meeting on Thursday. UH So a lot going
on with the market right now, but it certainly had
a tailwind post election and UH. And we'll talk also
(00:47):
about some of the sectors that have led the way
and some that have lagged in a little bit about
what we what we see moving forward, why why they
might have lagged, and then then talk a little bit
about you know, what we see moving forward from here.
And I think air too and Good morning, Aaron, How
are you good? And I think a lot of it
(01:08):
has to do with, you know, the outlook for inflation.
You know, sectors that have leed, utilities of leg utilities
are down since the election. Real estate's down since the election.
A couple those are a couple of sectors that might
be hit because from according to this CBOE that there
(01:31):
should be you know a little bit more inflation and
a little larger budget deficit.
Speaker 2 (01:37):
But we did, yeah, we did see. We did see,
you know, Powell cut up a quarter percentage point. You know,
the consumer is still in good shape, you know, at
the same time we saw the ten year treasury spike
post election. Because you know, I think a lot of
Trump's policies could be temporarily inflationary, right, I think, you know,
in the next one to you know, four years, let's say,
(01:58):
as if he does accomplish bringing more manufacturing in jobs
back home, the thought processes is that could be temporarily inflationary,
but it's for the greater good of the American worker
four or five years from now if we can start
bringing manufacturing and jobs back home. So I think that's
kind of what we're seeing. I think We're seeing a
(02:20):
lot of you know, speculative trades in the past, in
the past three days post election, and I wouldn't take
I wouldn't not I wouldn't take it too seriously. But
I think that we have to kind of we're in
a wait in se mode, and we could be in
a wait in sea mode for another month or two
(02:41):
two months, let's say, to see what really happens when
when President Trump is is does come into office and
you know, what things that he campaigned on are our
I guess most critical in his mind.
Speaker 1 (02:55):
Now who he surrounds himself with in his administration. You know,
you know, I'm reading from American Funds. Trump's victory signals
major policy shifts ahead and under. The political component to
this report says Trump has one decisively and the US
has avoided a political legitimacy crisis. And I think that
was something that was weighing on the markets a little
(03:16):
bit as well. And we said it here on this
show several times that if President Trump lost, there would
have been a challenge i' lah, you know Gore Bush
back in two thousand and that could have caused some
sort of I know, back back in two thousand the
market pulled back about five percent. We did say any
pullback like that would be a buying opportunity because it
would be temporary and not really a secular change in
(03:38):
the markets. Market has a tail when the economy has
a tail. When inflation is coming down on employments around
four point two percent, so things are going pretty well.
But Arka went on to say the report went on
to say Trump game not only the support of working
class white men, but also many black and Latino voters,
underscoring the importance of inflation, immigration and national security has
key issues that swayed voter. And I think that that's
(04:03):
you know, what has brought President elect, former president and
President elect Trump back to power.
Speaker 2 (04:10):
And so I think decisively too, winning the popular vote
and every single swing state. So you know, this is
this is what I guess America wanted, or a little
bit more than half of America, those who voted wanted.
And I think now in the next let's say, three
or four or five years, we're going to see if
this plan actually works and works out for the people
(04:33):
that voted for him. I think that you know, you
saw an article come out from the economists talking about
how Trump Trump's presidency will be a risk, and I
think it's a risk a lot of the American people
are willing to take. It's it's just it's just a
(04:53):
high risk. It will be a high risk presidency. You know,
although we've been studying global trade and economics for you know,
let's say centuries modern economics, and let's say globalization is is.
Speaker 3 (05:09):
Is much newer than that.
Speaker 2 (05:11):
So a lot of the things that Trump has talked about,
you know, tariffs on all imports sixty percent, tariff, tariffs
on Chinese goods, what that actually means you know, for inflation,
for bringing jobs back home, and and and for the
American people. I think if it works out, a lot
(05:33):
of his policies could could really build up the middle class.
If it doesn't work out, it could really hurt the
middle class. So yeah, it's uh, it's it's how going
we a I think like last presidency, if you look
at Trump's at the VICS index, you know, it was
up and down, it was up and down. I think
you can expect the same over the next four years.
Speaker 1 (05:56):
I think it was just no longer the status quo,
no longer the status quote, and the drift to the
left is like and this is I don't want to
get into political commentary, but you know, it's it's obvious.
So but but the economic repercussions, and let's let's try
to talk about some of the economic repercussions there and
juxtaposed or associate that with with some of the some
(06:18):
of the better performing sectors through you know, Wednesday and
Thursday of the trading week. You know, some of those
sectors that that did well, you know, and some that
did poorly. You're probably talking with a Trump administration higher
GDP growth, you know, you think about a lower corporate
taxes or corporate taxes. Let's say, let's say corporate taxes,
(06:41):
we're going to figure the other stay here or move lower.
Speaker 2 (06:43):
You know, he did propose a fifteen percent corporate tax,
right down from twenty one percent, so that would theoretically
be very good for the firstocks.
Speaker 1 (06:52):
First ocs, right.
Speaker 3 (06:53):
Uh.
Speaker 1 (06:53):
It also an income tax that's probably going to be
relatively you know, I don't think you'll see an eradication
of the of the progressive income tax, you know, replaced
by tariffs. I think that was pretty much a campaign talk.
And well also you were talking earlier that looks like
Republicans took the Senate. We'll see what happens with Congress.
(07:13):
That's still up in the air, but my guess is
he softens his rhetoric the personal income tax. My guess
is that income taxes, personal income taxes will stay relatively
consistent with where they are now. Perhaps they'll bring the
corporate tax rate down, you know, we'll see about that.
But let's assume that the corporate tax rate stays at
(07:33):
twenty one percent and the personal income tax pretty much
stays where it is. Maybe you'll get a little some
more deductions. Maybe the salt tax will come back, or
the deduction of the sault salt will come back. We'll see,
but you're probably looking at a little bit higher GDP growth.
A little bit higher GDP growth means, you know, we've
been talking about it for a while. There probably probably
(07:55):
means a little bit more inflation because of you know,
the spending because of tariffs. The tariffs are a one
time costed past the line to consumers, so you may
see that, but in general, you'll probably see inflation a
little bit higher. Again, we didn't think it was We
thought the Fed was gonna get it was gonna be
(08:15):
hard to get it down to two percent anyways, but
maybe you're talking to half a point higher than where
we thought where it would end up. You're probably talking
the ten year which is sitting at four thirty that
you mentioned earlier in the show. The tenyure move from
like four to twenty five to four to forty five.
You know, it's probably gonna stay above four.
Speaker 2 (08:34):
Would you say, yeah, I think I think for the
time being, you talk about the ten year treasury, I'm.
Speaker 1 (08:39):
Sorry, yeah, trainar treasury.
Speaker 2 (08:40):
No, no, yeah, you know, I think that the ten
year treasury is affected a lot by uncertainty in the
economy and the aspect of and the idea that inflation
is here to stay, and I think that I think
it has to stay higher, which in turn, you know,
mortgage rates are probably going to stay higher for the
time being because there's a lot of uns certainty with
(09:01):
how uh.
Speaker 3 (09:02):
All this tariff talk plays out.
Speaker 2 (09:05):
So I think you could see this the tenure at
least hovering around four percent for the time being.
Speaker 1 (09:10):
And the thirty year treasure or thirty year mortgages are
around seven six or seven, and as you know, it's
still it just also reflects a lack of inventory. But
if if GDP growth picks up, and a lot of
people think, and I kind of agree, we've got to
grow our way out of the deficit. We can't really, yeah,
you know, cut our expenses to the point when we
(09:30):
got to cut offense side.
Speaker 2 (09:31):
But so you know, Elon Musk campaign helped Trump campaign.
Speaker 3 (09:35):
On the idea of cutting a lot of expenses.
Speaker 1 (09:38):
And who's the Who's the person from Pallenteer was Linsdale?
What's his first thing? John linsdeal on? Yeah, he talked
right here. He talked about I saw an interview with him,
and he was talking about the fact that in the
first Trump administration he had to be concerned, he had
to be you know, kind of work a little bit
more with others. He had a round himself with unlike
(10:01):
people that were unlike him. He had to you know,
certainly in the back of his mind worry about being reelected.
You know that may or may not have been derailed
by cod COVID. But now he doesn't have those concerns. So,
you know, John Lonsdale said, and I kind of agree
with him, and I think that's what the economist was
saying in that the Trump Trump presidency has tail risk
(10:24):
and that tail risk is that you know, uh, the
policies that he'll enforce, you know, may not be good.
You know. The economists said, you know, regarding their endorsement
of come out Kamala Harris, that you know, she was
the safer choice, and I think she was the safer choice.
Trump is probably going to be feast or famine, and
of course we'll see, we'll see how that plays out.
(10:45):
The market is insisting that it's going to be a feast.
But I think the market reflected you know, and look,
you know, I mean, everyone has their own opinion. My
guess is the market reflected more that there wasn't a
legitimacy question as to who won the election. Kamala Harris
got got beaten pretty sallely. Who knows if it was
a lot closer, whether she would have contested it, I
(11:07):
don't know, but she didn't and because probably because she
did get beat so sally. And now it's in.
Speaker 3 (11:13):
The lower corporate tax rate as well.
Speaker 2 (11:14):
Yeah, I mean it's hard to it's hard to you know,
argue against the lower lower corporate tax shape being good
for the stock market.
Speaker 1 (11:24):
Some some of some of the sectors there technology since
the and this is Wednesday and Thursday's trading technology up
four point six four percent, leading the way. Consumer discretion
are at four point five to two. You have financials
up four point three seven. I'm going to give my
(11:45):
go ahead. No, no, no, go on. I am going
to say that has to do with less regulation. The
Biden administration and I assume the Harris administration would have been,
you know, look at it, look at tech. Are we
going to break up Google? Uh?
Speaker 3 (12:01):
Financial less regulation.
Speaker 1 (12:04):
Consumer discretionaries? Pretty much? Amazon is test Len's consumer discretionary
as well.
Speaker 3 (12:11):
It is. Yeah, I think it's the second largest holding
in the x L Y.
Speaker 1 (12:14):
So, so Elon Musk's in with in with Trump, you.
Speaker 2 (12:19):
Know, Jeff Bezos, I think too. You know, I think
a lot of people kind of played the middle this
this election, didn't want to go too far each way.
The Washington Post didn't endorse anyone. You saw what, you know,
Elon Musk did attach himself to to to to Tessa.
You had, you know, Mark Zuckerberg congratulate you know, uh,
you know Donald Trump.
Speaker 1 (12:38):
So did Jeff Bezos. The Post odds with the first
Trump administration pretty pretty heavily.
Speaker 3 (12:44):
So I think, you know, the you.
Speaker 2 (12:46):
Know, the the the tech uh, you know, giants that
you know, we're once kind of the people that Trump
haters hated, Trump supporters hated the most, are now kind
of Trump allies. So they've they've kind of shifted, which
would be good, I guess for their companies. And you know, yeah,
you know, healthcare is up point eight five percent. It
(13:07):
looks like industrials up three point two nine percent.
Speaker 1 (13:11):
Energy up three point two eight So so we can
see industrials up.
Speaker 2 (13:15):
Odd thinking with with energy, if if we're going to
drill more, drill more and become energy independent, that could
bring the call, bring the you know, the price of
energy down. But you know it also, hey, maybe we're
we don't regulate energy companies as much either, so you know,
it could be good for I guess, you know, margins
for these energy companies.
Speaker 1 (13:36):
And I think energy companies also have a if you
think about the past administration, Yeah, in the first couple
of years, two or three years, it was hard to
get any type of permits. But in the second year,
in the not the second in the second half more
so in the past year and a half or so,
(13:57):
we are drilling more than ever. But but these companies
have been self regulating. They don't want the boom and bust. Yeah,
there's that, and I think the Trump administration is conscious
of that. And also you look at OPEK and OPEC
plus having some influence there as well. And I think
President Trump, the Trump administration, second Trump administration wants to
(14:19):
open up energy, domestic energy production to foreign countries. So
I think that's why you had that uplement. It was
also sold off quite a bit coming into the election.
Speaker 2 (14:31):
Yeah, energy has had a weak year all around. Xxon's
had a good a good year, so it's kind of
helped the xcely because it's such a large percentage of
the XLA. But you know, you're to date the you know,
the XCEL is up thirteen point seven seven percent. You know,
it's three month is up seven and a half, so
half of it is in the last three months, and
(14:51):
I think, you know, it's quite a large percentage of Yeah,
twenty two point sixty one percent is Exon and fifteen
percent of Chevron, so you're looking at almost you know,
three thirty eight over thirty eight percent of the XL
being those two companies.
Speaker 1 (15:05):
So those are some of the halves industrials. You know,
the whole concept of bringing uh production home that have nots.
I think have some of the have nots. Consumer staples especially.
Speaker 2 (15:20):
Had a rough day post election, and I think that
has to do with yet tariffs. You know, a lot
of the you know, the goods being bought at Low's
are are manufactured foreignly foreign, and you know that could
that could impact Loew's earnings a little bit.
Speaker 1 (15:35):
But also in inflation there there's also if we're going
to get back into a higher growth economy, and again
growth was decent during the Biden administration, inflation adjusted growth
not so much as we all know, and probably why
one of the reasons Kamala Harris was not elected was
that inflation adjusted growth world feeling in our pockets and pocketbooks.
(15:56):
But so I think they're consumer but let me it's
a consumer state. Is also the fact that if we're
going to accentuate growth, man, we're back into tech, we're
back into consumer discretionary, we're back into industrials, we're back
into materials, and consumer staples is more of a place
to hide down one point two seven healthcare, the predictability
of earnings a place to hide, you know, up only
(16:18):
point eight five percent. So I think those were reflected
not as much with interest rates staying high, but more
so with Man, if we're going to grow our way
out of the debt and deficit, we're we're we're gonna
do it with our technology. We're gonna do it with production.
We're gonna do it with those things. So we don't
need to hide in consumer discretionary. We don't need to
hide in and I'm sorry, consumer staples. We don't need
(16:40):
to hide in healthcare.
Speaker 2 (16:41):
And over the next five to ten years, I think
that I think that one of the only ways to
do this is is is to embrace this let's say
technological revolution, whether it be AI, whether it be space.
And I think that I think that that's our you know,
chance uh to really grow away out of this is
(17:02):
create new sectors that maybe weren't here five or ten
years ago.
Speaker 1 (17:06):
And then so yeah, and you see that really in technology,
the performance is the number one performer, which which really
flew in the face of rising interest rates. We can
think of rising interest rates, the mantra back in twenty
twenty two was sell tech. As interest rates go high
or secular grows, will have a more difficult time making headway.
They've done the best over the first couple of days. Again,
(17:27):
this may all change next week, but I will so
the four laggards, two of which we mentioned, consumer staples
and healthcare, we're both more Hey, we're gonna opt for
growth companies. I think I think individuals are making a
mistake with healthcare because deregulation, you know, or less regulation.
Speaker 3 (17:44):
We'll also see that a little bit. You know, U
n H was up, sign was up dancially.
Speaker 2 (17:49):
You know, it's five day performances eight point five to
five percent.
Speaker 1 (17:52):
So how about you and H.
Speaker 2 (17:54):
I'm saying U n H is eight point five five percent, Yah, yeah,
that's you know, five day is up two point three percent,
so not as well, but so yeah, I think you'll
maybe maybe healthcare won't be on the on thes as
much as as and this administration as opposed to you know,
(18:15):
inherits administration that would maybe implement more whatever regulations, regulations
within that sector.
Speaker 1 (18:26):
And then utilities down point eight six percent, in real
estate down one point four to six percent. Yeah, these
are these are all the select sector spiders, you know.
The guest there is uh basically just interest rates sensitive
areas that will will not do as well, you.
Speaker 3 (18:42):
Know, I guess, you know, with six minutes left. That
moving on a little bit.
Speaker 2 (18:48):
I think if if you look at you know, I
have this right here, Trump on issues. It's from MFS
Trump GOP appeers headed for sweep and talks about taxes.
How you know you'll see a proposed Lauren Coper tax
rate to fifteen percent from twenty one percent for domestic manufacturers,
you know, trade ten to twenty percent, universal baseline tariff
on US imports, sixty percent tariffs on all Chinese imports,
(19:09):
as well as tariffs on certain auto auto imports from Mexico,
so maybe even American companies bringing manufacturing back home. I
think that's obviously a goal labor and immigration Trump aims
in part, and I think that's one of the this
is one of the biggest risks to our economy over
the next ten years is let's say a mass deportation
(19:31):
of immigrants, and it would be inflationary to the US
economy as it would probably.
Speaker 3 (19:39):
Drive up wage growth.
Speaker 2 (19:41):
So you know, I think a lot of people said, hey,
you know, I'll take some inflation for you know, some
better paying jobs for the lower for the lower class.
And I think you saw that just by the voting
numbers for lower income Americans. They said, hey, you know,
although we might have some inflation, you know, at least
all get paid a little bit more. So you'll have
that shrinking labor supplies, you know, a possibility of reduced
(20:04):
economic growth as although you might say, you know it's
it's good for America as a whole. You know, immigrants
do spend money, which helps with GDP.
Speaker 3 (20:16):
So you know, I think I think that this first
half is.
Speaker 2 (20:21):
You know, kind of characterized by this is this is uh,
you know, a feast. This will be a feast or
fam in four years, and this is I think a risk.
I think that's the risk.
Speaker 3 (20:34):
Uh. You know a lot of the American people are
willing to take.
Speaker 1 (20:38):
Yeah, and the market and you the gurd job is
to kind of figure out the holes that allow our
clients to continue to move forward.
Speaker 3 (20:46):
You know.
Speaker 1 (20:46):
Certainly, when the market goes down, our client's portfolios go down,
because that's what correlation means. However, you know, I think
as the markets I think are signaling positive positive results
from the Trump administration, and I certainly don't blame them,
(21:07):
I think that as we move out one, two, three,
four years, then Trump's policies become more ingrained, and you
want to make sure that he make sure that what
you mentioned tariffs as an issue. Deportation is costly and
you can wait as benefits, but also cost a strain
in the labor market if.
Speaker 2 (21:25):
You and I'm talking a lot more about you know,
you're seeing declining birth rates in the United States, you know,
with with mass deportations. Look at the Japanese economy over
the past thirty years, Look at South Korea, look at China,
look at Turkey. You're seeing these massive declines in population
which which in turn leads to stagged and economic growth.
(21:49):
So you know, that's obviously just probably going to be
a concern. Maybe not now, but in ten fifteen years,
when are when my children are entering the.
Speaker 1 (21:59):
Late well even in two or three years, when when
you think about the money spent and look, I think
I think we all and both the right and the left,
can sit back and say immigration is a positive for
the country. I think it's a question as to what
level and how regulated it should be, you know, And
I think that's up to the politicians today.
Speaker 2 (22:19):
And I think the Democrats were scared to even breach
the issue.
Speaker 1 (22:25):
Yeah, or didn't have a lect a standard really over
the past three or four years, you know, and or
didn't have didn't have one that resounded with the American public. Yea,
you know, they they chose to focus on other things.
So that's that's what we have going for. So good
two days for the market. You know, markets opening up
kind of flat this Friday. Uh, we are we you know,
(22:47):
one of the things. You know, So Warren Buffett has
raised a lot of cash for whatever reason. Maybe he
was concerned about the economy, Maybe he was concerned about
the election, Maybe he was concerned about capital gains, tax
rates going up. Maybe he just wanted to do that.
You know, I don't I don't really know exactly what happened.
Alls I will say that is, you know, even Warren
Buffett can't time the market. So our when we when
(23:10):
we uh, when we plan for our client's future, it's
regardless of the president. We look mostly at his or
her policies that will impact those plans and then how
they play out, because nobody knows, you know, how they're
exactly going to play out.
Speaker 2 (23:26):
Uh.
Speaker 1 (23:27):
The mark was up about fourteen percent a year during
this past Biden administration, was up a little less than
that under the previous Trump So our clients did well
under both, you know, as we come into the last
couple months of the year. Uh. The market you know
during election year three point three percent with positive returns
seventy five percent of the time since nineteen ninety and uh,
(23:49):
and so it bodes well for the rest of the
year after that, we regroup and go from there. Right now,
it's ten thirty on the station depend Upon for news,
weather and information. News to K ten and one O
three one w g Y and welcome back to the
second a half five of the Capital District's Money and
Investment Program. You're listening to the Fagan Financial Report from
Denis Fagan, sitting here with my son Aaron, as we
do every Sunday right here in New Stoke ten actually
it's Friday, about noontime. We record the show usually on Fridays,
(24:13):
and then do the first half, take a little bit
of a break, and then do the second half. And
right now, the markets having a good week, having a
decent day, holding on to those post election gains that
it also added to those. He looked at the NASA composite,
the S and P five punted at the total market
in the next closing at record highs on Thursday, and
(24:36):
right now are above those record highs. At the close
today they're at the inter day highs now as the Dow.
They're talking a little bit before the break about you know,
how the market does. You know, for all years since
nineteen ninety this is according to Bespoke, the meeting gain
has been three point three percent with positive returns twenty
five out of thirty four times, and that is a
(24:59):
full for the equity markets from election day to the
end of the year. For the S and P enter November,
the year to date gain of twenty percent plus it's
averaged the further gain of five point four percent in
the final two months of the year. So there's a
little bit more information over the last fifty years from MFS. Again,
(25:20):
the Dow Jones industrial averages average again of two point
zher one percent in November with positive return seventy two
percent of the time. It's the best election year since
nineteen thirty six with twenty one point nine percent gain
through ten thirty. Obviously, elections, you know, and they're just
the presidential election year, so only every four years and
(25:40):
so on and so on. You know, is this risk on.
We talked before the break about the largest or not
the largest sector of the best performing sectors, and since
the election, again it's only been two or three days.
It's risk on. You know, it's risk on. It's technology consuming,
discretionary communication services risk go off. You know, healthcare risk
(26:04):
go off, real estate risk off. Utilities that are two
of those three are down, and then healthcare being up.
Speaker 2 (26:13):
Yeah, I mean, I think that you have to assume that,
you know, the risk on trade would be there a
little bit now that Trump has been elected. I think
what you got through is a little bit of the
possibility of some contention during the election because the margins
were so gray in Trump's favor. You have corporate tax
rates getting cut. So I think, you know, I think
(26:36):
at first glance, you know, you got through the unknownst
of the next few months.
Speaker 1 (26:41):
You know.
Speaker 3 (26:41):
I think once we hit the next.
Speaker 2 (26:42):
Year, I think we'll start to see what policies Trump has,
what the ones that he prioritizes, and then I think
the market will shift based on that. But I think,
like on both sides, you heard a lot of rhetoric
that that who knows how much and how serious that
rhetoric was and what parts are more serious.
Speaker 3 (27:04):
Than the others.
Speaker 2 (27:04):
So now I think, you know, it's kind of like
an at first glance look at the market, and I
think signs are positive with Trump being elected. You know,
you got over the first unknowns. The next unknowns will
be tariffs, how much tariffs, who gets, what countries get tariffed?
Speaker 4 (27:30):
Forel Yeah, foreign policies, whose cabinet is you know.
Speaker 3 (27:34):
You know what happens in Russian Ukraine. So but I
think for now.
Speaker 2 (27:39):
It's the rest of the year forecast is pretty unfavorable
towards the equity.
Speaker 1 (27:46):
Market, you know. But I think we both feel like
I've been doing this forty five, forty how many years? Yeah,
forty one years and forty yeah, forty one years, and
I think every think it's like it's like what it's said,
stop the music. You know, everybody's walking around the chairs.
(28:06):
Nobody wants to be left behind this year for some reason.
You know, the end of the year is like, Okay,
we start over again, and we see how we did
at the end of the year. But in reality, it's
not really that really a you know, everybody begins to
diet on Monday. Everybody you know these breakpoints that people
look at, but and I don't know why that's the case,
or someone will say, hey, I'm retiring, should I change
(28:27):
my asset allocation? I don't know. A month ago you
still kind of had the same thing because now you
need you need the money for for income. But I
guess my point is that you know it's gonna it's
it's it's a tail wind to the market, you know.
Right now, I think it's nobody wants to be left
out of the loop. Nobody wants to be left out
of left out of the risk. And if the market's
gonna keep going out up to the end of the year,
(28:47):
but at some point in time, someone's gonna say, up,
I'm gonna you know, it's the music's gonna stop, and
it's gonna be like, I want to book these profits
and close out the year because it's been such a
good year and.
Speaker 3 (28:56):
I don't know.
Speaker 1 (28:57):
Maybe maybe it won't happen. Maybe it will, but don't
yourself open to think that it won't. On the other hand,
you look at Warren Buffett probably worried about whatever we
mentioned in the first half. Was he what was he
worried about the election? Was he worried about the market.
Is he worried about just trying to capital gains, tax
rates going up, whatever, And he got out of some stocks,
you know, I'll be at much lower prices. Look at
(29:17):
Back of America's got to be up five or six points,
maybe you know, fifteen or twenty percent from where he
was selling it. So regardless of where the market goes
over the short term, you know, as I was saying
in the first half, we allocate assets for the long term,
regardless of whose presidents and then look at policies that
that that he or she he in the past has Uh.
Speaker 2 (29:38):
And I also came up with him he has from
twelve point eight to forty nine point three percent cash
from the first quarter first quarter, so uh, you know,
let me just read this again. Apple steak slash by
another twenty five percent. That's down twenty five percent. Basically,
you know, Warren Buffett is slashing it is raising cash,
(30:01):
and you know he usually does it around elections. But
I think you also have to you know, look what
happened this year with just insurance carriers, and twenty five
percent of of Berkshire's Hathaway revenue is insurance companies. So
I think insurance companies have to have more cash available.
So now I think everyone wants to say, oh, warm
(30:22):
Buffet's raising cash for this reason or the markets at
at hies. But he has a different agenda for his
companies and his cash than you know, the typical American
American does that. That is investing too, So I think
that's you know, important to differentiate.
Speaker 1 (30:37):
And I yeah, and I agree. And I also we
have to see where capital gains tax goes. I doubt
they're going to go up, like we said in the
first half. But let's talk a little bit about jar Powell,
who the Wolf of Wall Street. You know, that was
one of the interesting questions yesterday. Powell was asked if
he would step down from his position if present, like
(30:59):
Donald Trump asked him to. When he said no, I
mean literally, he just said no. And later on another
porter asked him if the if the if the president
had the power to fire demote him, and Pouel said
that was not permitted under laws. It was like Leonardo
DiCaprio and the Wolf from Wall Street. I'm not leaving.
I'm not leaving.
Speaker 3 (31:15):
So and you know, no, I think he should.
Speaker 2 (31:17):
I think you know, the the the good thing about
a democracy is checks and balances. And you know, I
think a good business owner or a good leader doesn't
just surround himself by people that agree with him.
Speaker 1 (31:29):
So look at right, look at those that do that's
the case. You know, you want checks and balances, yea, yeah, yeah, yeah.
Speaker 2 (31:36):
You don't want to be, you know, the smartest in
the room on every subject. You want to listen to
people that know more about you and on specific things.
And I think that's probably one of you know, you
would have to think of one of Trump's maybe fault is,
you know, firing people that don't agree with him, and
I don't think that's the right course of action. I
think Powell maybe stumbled a little bit coming out of
(31:58):
the gate with the trans jub you know and inflation
being transitory, which I obviously hurt the account. But I
think he's done quite a good job to past year
and a half, two years really with with getting inflation
under control, with this soft landing. You know, we saw
a twenty five basis point cut hike on that Wednesday,
Yeah yeah, cut cut on Wednesday.
Speaker 3 (32:19):
And he's doing a good job.
Speaker 1 (32:22):
He was also, uh, he talked a little bit about
you know, the federal So so the FED deals with
we'll keep probably should keep going down monetary policy. But
the FED also deals FED deals with monetary policy, interest
rates and the like, you know, and money supply. The
(32:45):
federal government, Congress, in the in the in the administration
obviously deal with legislative things, including tax policy, fiscal policy.
And I think when President Powell or char Poll was
asked about the rising deficit and he responded to federal
government's fiscal path, fiscal policy is on an unsustainable path.
(33:05):
The level of our debt relative to the economy is
not is not unsuitable. The path is unsustainable, so I think,
and we see that in a very in a very
large deficit, you're a full employment and that's expected to continue.
So it's important to be dealt with. It's ultimately a
threat to the economy, you know. I think one of
the things is that you know when you run when
you run a large deficit. And I think this is
(33:26):
part of the reason maybe why Trump, why Donald Trump
was elected re elected is I think, and this is
contrary to what a lot of organizations have found that
you know, they find that President elect Trump's uh economic
policy will add more to the debt than Kamala Harris
is one. But that said, I think one of the
(33:48):
reasons President Trump was elected is you know a lot
of people probably didn't know that and maybe or didn't
believe it. But also that you know he has President
Elect Trump had more growth oriented policies there. But that said,
you know, if the deficit keeps trying is and it's
not gonna matter till it matters. And I think right
now we are the key continued to look at where
(34:13):
interest rates go because interest rates generally speaking, will trend
down after a rate cut, and they've kind of they've
gone out. They went up certainly after the last fifty
basis points and right now we'll see what they do
after this twenty five basis point cut. But I think
that's that's one of the keys with our economy is
what's gonna what's going to go on with interest rates.
There's some concern that, hey, the Fed may be losing
(34:35):
control of the bond market, you know, yeah.
Speaker 2 (34:37):
And I think that on average, we are our outstanding
bonds are about three point We pay about three point
four percent to those to those treasury holders. And I
think that fear is that tariffs will cause inflation to
remain high, which will then in turn make the fed
(34:59):
head have to have rates remain high, which would just
balloon our financing costs as a country.
Speaker 3 (35:09):
Then you would lose then you could possibly lose.
Speaker 2 (35:11):
Some faith in in in the US currency, and and
and that would just continue to balloon and and and
have you know those interest rate rate payments with three
point four to three point five to three point six.
I'm not too worried about that yet. But you know,
we haven't seen the effect that the that these proposed
tariffs does have on our economy and inflation. So I
(35:35):
think that's that that's a huge unknowns. And I think
the last time we had major tariffs like this was
I don't propose like this was at least fifty brought
us you know, that brought us obviously brought us into
the not obviously, but brought us into the Great Depression.
And you know, being a manufacturer way more of a
(35:56):
manufacturing based economy in the twenties and now where you know,
obviously more of a service based economy, there's not that
much back testing we can really do. So I think
that will be another unknowns that could arise next year,
that could maybe make the market a little bit more volatile,
because you know, I think, as we just saw this
past week, is the market just wants to see the
(36:19):
direction that we're going. And the more the economy is going,
the more certainty to that, the more the less volatile
the market is, and the happier people are, and I
think the easier it is to invest in different sectors
and in the stock market. So now, the market doesn't
like unknowns, and we always talk about that. I think
that's the biggest unknowns is the effect that tariffs do
(36:42):
have on inflation in our economy overall.
Speaker 1 (36:45):
Yeah, but you know, you're relying on President Electromp to
apply them in the appropriate manner, and you know, assuming
that he will yea and we'll see how We'll see
how that goes. You know. Paul also talked about monetary
policy still being restricted. Mean it's interest rates are still
too high. We think that even with today's cut, policy
is still restrictive. So that means, you know, depending upon
(37:08):
the data. The FED always talks about being data dependent,
interest rates will keep coming down. Uh, and uh, there's
some debate as to whether or not they should. You know,
I wouldn't mind seeing a pause in December.
Speaker 3 (37:21):
Yeah, me too.
Speaker 1 (37:22):
I think it would be you know, it'd be good
to see. Uh, you know, because the other thing, too,
is that there could be a shock to the system,
whatever it may be, you know, geopolitical, economic, most likely economic. Yeah,
you know, something happens to the economic system, our economic system.
You know, China invades Taiwan, who knows something that Israel
(37:44):
decides to blow up the Iranian oil fields, and and
and the the mid Middle East blows up and oil
goes way high. So, uh, Powell in the Fed want
to keep some dry powders. So although they are restrictive
relative to inflation based upon historical measures, it's not a
idea because the economy is doing pretty well to kind
of say, okay, let's let's keep let's keep interest rates
(38:05):
right here. The odds are good they're gonna cut in December.
But you know, I would not I would not be surprised,
nor would I be adverse to them. Just kind of
like using December and say, you know what, we're gonna take,
you know, one more month and churn this out again.
In January.
Speaker 2 (38:21):
The consumer continues to be strong. You did see PCE
up two point one percent, year over year in September,
which was the lowest reading sense February of twenty twenty one.
Speaker 3 (38:32):
So you are.
Speaker 2 (38:33):
Seeing, you know, maybe a little bit of a weakening economy,
but but a strong consumer. So I think it's I
think it's a decent I think it would be a
decent idea to pause then and then see what happens
at the beginning of next year and with with the
new administration.
Speaker 1 (38:49):
Let me see what else I can get out of here.
Central Bank's not in any preset course well positioned to
handle risk. Trump election has nothing to do with the
Fed out look, and that is about it. But they
did cut to the target range, went from five excuse me,
(39:09):
four to seventy five to five percent down to four
p fifty to four to seventy five percent with the
federal funds rate, and obviously the prime prime rate came
down along with that a couple of things. We probably
got eight or nine minutes to go one of the
(39:30):
and we stayed out of it. You know, there was
I forget who it was, David Tepper maybe who's a
big investor, looked at China and some of the stimulus
they were providing and invested in China. Generally speaking, we
don't invest in China just because it's just so opaque
their financial system. That and it's dominated obviously it's not
a democracy, so you know, you really have government type
(39:54):
of directed or orchestrated fiscal and monetary power. See you
see where that's gotten China really, I think, yeah, yeah,
they're having they have troubles now and how they handle COVID,
you know, companies and are moving to other countries, specifically
India and and they're dealing with But but god, did
(40:15):
you want to say something. They did announce at one
point for a trillion dollar package of just kind of
like shuffling dead around from you know, the the broader
government to more two more local governments. But but it
really wasn't a stimulus package. So the Chinese market's still
kind of like stumbling about on unemployments high You mentioned
(40:36):
it earlier about a declining population or a stagnating population.
It's not growing anymore, and then home prices are they
are declining to the tune of seven or eight percent
uh year over year as of the September numbers.
Speaker 2 (40:50):
Yeah, I think China is obviously as influential, you know,
being what about twenty percent of.
Speaker 3 (40:54):
Of GDP UH Global GDP Global GDP.
Speaker 2 (40:59):
But I think, as you said, we're you know, just
as investors, you know, we can't we specialize more in
US centric companies, and it really has worked out for US,
especially the past fifteen years. And I think what the
United States has that other countries don't have is the transparency,
the innovation, and the reliability of the US currency. So,
(41:23):
you know, do I think that emerging markets could outperform
at different points in time?
Speaker 3 (41:30):
Maybe? Maybe?
Speaker 2 (41:32):
Yeah, I just don't find I think you invest in
what you know, and that's kind of what.
Speaker 3 (41:38):
I think about China.
Speaker 2 (41:39):
I think, you know, we we're better at valuing and
investing in US companies and I think they are the
best in the world, and you know, China is just
so opaque that it's hard to really invest in them.
Speaker 1 (41:52):
Yeah, So you know, if you want to look for
alternatives to that investing in China, you know, I would
look at you know, what's where it's the v O,
which is the Global x U S is that vt
O or from from Vanguard?
Speaker 2 (42:09):
I'm not sure, you know, oh yeah, the vt is
a total world stock ETF.
Speaker 3 (42:15):
I don't know if there's one.
Speaker 1 (42:16):
X A CWX is another one that's an international SHG,
which is an emergent market ETF. I guess what I
would say is that I would think that, you know,
investing in China directly is not for the faint of heart.
Speaker 2 (42:31):
Yeah, and you know, VT the Vanguard Total World Index
is only three percent invested in China. I'm seventeen point
nine in Greater Asia, but the bulk of that is Japan.
Speaker 1 (42:43):
That's interesting, Yeah, what do you know, what do you so?
So where do you where do you allocate assets? Now?
If you look at the rally that we've had this year,
if you look at domestic versus overseas, you know, dead
(43:05):
versus versus equities.
Speaker 2 (43:07):
With how well, let's say that the triple qs have
done like large cap tech has done the past fifteen years.
Speaker 3 (43:14):
You know, I don't think that just because.
Speaker 2 (43:19):
This government administration will be a little bit more favorable
towards the larger tech companies. Like if you just look
at the QQQ, it's five day performance is up five
point six six percent, which is you know, obviously a
lot especially in five days, you know, and it's one
month performance is you know, up six point five two percent.
(43:40):
So you know, it really took off when Trump's odds
uh to to to win the White House went up,
that said, you know, these are these are obviously the
most innovative companies in the world, but I do still
think that, uh they could underperform relative to mid cap
and value stocks that have underperformed over the past ten
(44:01):
or fifteen years so greatly.
Speaker 3 (44:03):
So I think we.
Speaker 2 (44:05):
Have an economy and a stock market where stocks can
continue to work. It's just a lot of these stocks
that have kind of struggled over the past ten or
fifteen years. We'll start to really adopt these technologies. With midcaps,
you'll have a little bit of a friendlier interest rate environment.
In value stocks, you know, I think that they can
increase their margins. It's a little bit friendlier of a
(44:28):
of a corporate tax rate environment, and I think I
do think it'd be a decent time to shift some
of your assets from larger cap tech to tou yeah,
more value, mid cap.
Speaker 4 (44:47):
Any any any specific specific which is a lot dividend Aristocrat,
ETF G J A V A is JP Morgan active Value.
Speaker 2 (45:00):
It's five days up four percent, so it's done really well.
It's a great fund it's up twenty point ninety two
percent as a value fund, which is really great compared
twenty point ninety two compared to you know, Schwab Value fund,
which is up eighteen point eight three year to date.
It's a little bit of outperformance there. We owned three
m for people, so something like that. I still like
(45:21):
the Johnson's and Johnson's of the world, So, you know,
I think that those are some opportunities to you know,
I think I think it'll be in the next five
years will be a good time to really diversify your
portfolio or maybe reallocate some of those assets that have
done so well and maybe has have gone outside of
your intended allocation just based on their performance, and broaden
(45:44):
out your portfolio a little bit.
Speaker 1 (45:45):
Well, the other thing we talked in the office a
lot about and when the market's rock and you get
calls from clients, you know, what are your objectives? Yeah,
you know what we're talking about that earlier today someone's
sixty five or seventy years old. You've gotten to this point,
you've gotten into financial strata, this financial comfort zone. You know,
do you want to move up to another financial comfort zone?
(46:07):
Everybody does, But what's the risk if you you certainly
don't want to move out. So I think that's kind
of what you're saying, is that you know, the market
over the past five ten years has brought a lot
of people where they are going to be comfortable for
the rest of their life.
Speaker 2 (46:25):
Yeah, you know so, and they get rich phase of
your life and wealth accumulation phase of your life is over.
If you're sitting five more than ever, you know, it
is those companies that did so well for you. And
I think that's funny in that you've seen such a
shift towards even in my fourteen or fifteen years work
and here you've seen such a shift, and you know
(46:47):
what you compare yourself against and now it's the S
and P five hundred. But you know, we always talk
about the S and P five hundred being forty percent
in consumer discretionary and technology. That I don't know if
that's the place you want to over allocate yourself. Uh,
if you are in retirement now, I think I think
(47:08):
it'd be a decent time to, yeah, broaden out your
your your portfolio, reduce your risk, reduce the volatility. You
take advantage of a higher interest rate environment, and we.
Speaker 1 (47:19):
Use term specific treasury E T F S I B
T L I B T H I B t j
I B T O UH, the A G G. We
use p f F, which is a preferred stock index.
We use the Vanguard Wellington Fund, which is a good
balanced fund. Use b n D which is the Vanguard
Total Bond. In next, we use some JP Morgan Income Fund.
(47:42):
So those are some things that you should look at
when you're when you're building your portfolio. Is that come up,
come up with an asset allocation that works for you, you know,
given your current situation, and and then go from there.
So it's so, I guess in all and all it was,
it was. It was an exciting it was it exciting
leading up to the election. It was an exciting election.
(48:06):
Certainly half of us Scott what we wanted and half
of us Scott what we didn't want. But we're all
pulling for President Elect Trump as Americans, and we all
should be. And then we just go from there and
see how it plays out. Am I worried? Yeah, I'm
worried because I think the tail risk can read the
economists the interview with the economists from the Economist to Magazine,
(48:29):
there's a tail risk to Trump, you know, and he's
he's going to do more unconventional things. He's done them
in the past. He won't have another term to worry about,
so so you never know, but we wish him well
and then the market is off to a good start.
Thanks for listening, and'll talk to you next week.
Good morning, and welcome to the Capital District's Money and
Investment program. You're listening to the Fagan Financial Report. I'm
Dennis Fagan, sitting here with my son Aaron, as we
do every Sunday right here our news talk A ten
on one oh three one w G. Why we're actually
putting this recording together Friday morning. The markets as experienced
a couple of good days since the conclusion of the election.
And you know, whether it's the outcome the UH or
(00:23):
just the fact that there was an outcome, you know,
I think I think time will tell, but the market,
we'll we'll talk some this morning about what a Trump
victory might mean for the market, policies and the like,
what it might mean for interest rates. We also have
the FED meeting on Thursday. UH So a lot going
on with the market right now, but it certainly had
a tailwind post election and UH. And we'll talk also
(00:47):
about some of the sectors that have led the way
and some that have lagged in a little bit about
what we what we see moving forward, why why they
might have lagged, and then then talk a little bit
about you know, what we see moving forward from here.
And I think air too and Good morning, Aaron, How
are you good? And I think a lot of it
(01:08):
has to do with, you know, the outlook for inflation.
You know, sectors that have leed, utilities of leg utilities
are down since the election. Real estate's down since the election.
A couple those are a couple of sectors that might
be hit because from according to this CBOE that there
(01:31):
should be you know a little bit more inflation and
a little larger budget deficit.
Speaker 2 (01:37):
But we did, yeah, we did see. We did see,
you know, Powell cut up a quarter percentage point. You know,
the consumer is still in good shape, you know, at
the same time we saw the ten year treasury spike
post election. Because you know, I think a lot of
Trump's policies could be temporarily inflationary, right, I think, you know,
in the next one to you know, four years, let's say,
(01:58):
as if he does accomplish bringing more manufacturing in jobs
back home, the thought processes is that could be temporarily inflationary,
but it's for the greater good of the American worker
four or five years from now if we can start
bringing manufacturing and jobs back home. So I think that's
kind of what we're seeing. I think We're seeing a
(02:20):
lot of you know, speculative trades in the past, in
the past three days post election, and I wouldn't take
I wouldn't not I wouldn't take it too seriously. But
I think that we have to kind of we're in
a wait in se mode, and we could be in
a wait in sea mode for another month or two
(02:41):
two months, let's say, to see what really happens when
when President Trump is is does come into office and
you know, what things that he campaigned on are our
I guess most critical in his mind.
Speaker 1 (02:55):
Now who he surrounds himself with in his administration. You know,
you know, I'm reading from American Funds. Trump's victory signals
major policy shifts ahead and under. The political component to
this report says Trump has one decisively and the US
has avoided a political legitimacy crisis. And I think that
was something that was weighing on the markets a little
(03:16):
bit as well. And we said it here on this
show several times that if President Trump lost, there would
have been a challenge i' lah, you know Gore Bush
back in two thousand and that could have caused some
sort of I know, back back in two thousand the
market pulled back about five percent. We did say any
pullback like that would be a buying opportunity because it
would be temporary and not really a secular change in
(03:38):
the markets. Market has a tail when the economy has
a tail. When inflation is coming down on employments around
four point two percent, so things are going pretty well.
But Arka went on to say the report went on
to say Trump game not only the support of working
class white men, but also many black and Latino voters,
underscoring the importance of inflation, immigration and national security has
key issues that swayed voter. And I think that that's
(04:03):
you know, what has brought President elect, former president and
President elect Trump back to power.
Speaker 2 (04:10):
And so I think decisively too, winning the popular vote
and every single swing state. So you know, this is
this is what I guess America wanted, or a little
bit more than half of America, those who voted wanted.
And I think now in the next let's say, three
or four or five years, we're going to see if
this plan actually works and works out for the people
(04:33):
that voted for him. I think that you know, you
saw an article come out from the economists talking about
how Trump Trump's presidency will be a risk, and I
think it's a risk a lot of the American people
are willing to take. It's it's just it's just a
(04:53):
high risk. It will be a high risk presidency. You know,
although we've been studying global trade and economics for you know,
let's say centuries modern economics, and let's say globalization is is.
Speaker 3 (05:09):
Is much newer than that.
Speaker 2 (05:11):
So a lot of the things that Trump has talked about,
you know, tariffs on all imports sixty percent, tariff, tariffs
on Chinese goods, what that actually means you know, for inflation,
for bringing jobs back home, and and and for the
American people. I think if it works out, a lot
(05:33):
of his policies could could really build up the middle class.
If it doesn't work out, it could really hurt the
middle class. So yeah, it's uh, it's it's how going
we a I think like last presidency, if you look
at Trump's at the VICS index, you know, it was
up and down, it was up and down. I think
you can expect the same over the next four years.
Speaker 1 (05:56):
I think it was just no longer the status quo,
no longer the status quote, and the drift to the
left is like and this is I don't want to
get into political commentary, but you know, it's it's obvious.
So but but the economic repercussions, and let's let's try
to talk about some of the economic repercussions there and
juxtaposed or associate that with with some of the some
(06:18):
of the better performing sectors through you know, Wednesday and
Thursday of the trading week. You know, some of those
sectors that that did well, you know, and some that
did poorly. You're probably talking with a Trump administration higher
GDP growth, you know, you think about a lower corporate
taxes or corporate taxes. Let's say, let's say corporate taxes,
(06:41):
we're going to figure the other stay here or move lower.
Speaker 2 (06:43):
You know, he did propose a fifteen percent corporate tax,
right down from twenty one percent, so that would theoretically
be very good for the firstocks.
Speaker 1 (06:52):
First ocs, right.
Speaker 3 (06:53):
Uh.
Speaker 1 (06:53):
It also an income tax that's probably going to be
relatively you know, I don't think you'll see an eradication
of the of the progressive income tax, you know, replaced
by tariffs. I think that was pretty much a campaign talk.
And well also you were talking earlier that looks like
Republicans took the Senate. We'll see what happens with Congress.
(07:13):
That's still up in the air, but my guess is
he softens his rhetoric the personal income tax. My guess
is that income taxes, personal income taxes will stay relatively
consistent with where they are now. Perhaps they'll bring the
corporate tax rate down, you know, we'll see about that.
But let's assume that the corporate tax rate stays at
(07:33):
twenty one percent and the personal income tax pretty much
stays where it is. Maybe you'll get a little some
more deductions. Maybe the salt tax will come back, or
the deduction of the sault salt will come back. We'll see,
but you're probably looking at a little bit higher GDP growth.
A little bit higher GDP growth means, you know, we've
been talking about it for a while. There probably probably
(07:55):
means a little bit more inflation because of you know,
the spending because of tariffs. The tariffs are a one
time costed past the line to consumers, so you may
see that, but in general, you'll probably see inflation a
little bit higher. Again, we didn't think it was We
thought the Fed was gonna get it was gonna be
(08:15):
hard to get it down to two percent anyways, but
maybe you're talking to half a point higher than where
we thought where it would end up. You're probably talking
the ten year which is sitting at four thirty that
you mentioned earlier in the show. The tenyure move from
like four to twenty five to four to forty five.
You know, it's probably gonna stay above four.
Speaker 2 (08:34):
Would you say, yeah, I think I think for the
time being, you talk about the ten year treasury, I'm.
Speaker 1 (08:39):
Sorry, yeah, trainar treasury.
Speaker 2 (08:40):
No, no, yeah, you know, I think that the ten
year treasury is affected a lot by uncertainty in the
economy and the aspect of and the idea that inflation
is here to stay, and I think that I think
it has to stay higher, which in turn, you know,
mortgage rates are probably going to stay higher for the
time being because there's a lot of uns certainty with
(09:01):
how uh.
Speaker 3 (09:02):
All this tariff talk plays out.
Speaker 2 (09:05):
So I think you could see this the tenure at
least hovering around four percent for the time being.
Speaker 1 (09:10):
And the thirty year treasure or thirty year mortgages are
around seven six or seven, and as you know, it's
still it just also reflects a lack of inventory. But
if if GDP growth picks up, and a lot of
people think, and I kind of agree, we've got to
grow our way out of the deficit. We can't really, yeah,
you know, cut our expenses to the point when we
(09:30):
got to cut offense side.
Speaker 2 (09:31):
But so you know, Elon Musk campaign helped Trump campaign.
Speaker 3 (09:35):
On the idea of cutting a lot of expenses.
Speaker 1 (09:38):
And who's the Who's the person from Pallenteer was Linsdale?
What's his first thing? John linsdeal on? Yeah, he talked
right here. He talked about I saw an interview with him,
and he was talking about the fact that in the
first Trump administration he had to be concerned, he had
to be you know, kind of work a little bit
more with others. He had a round himself with unlike
(10:01):
people that were unlike him. He had to you know,
certainly in the back of his mind worry about being reelected.
You know that may or may not have been derailed
by cod COVID. But now he doesn't have those concerns. So,
you know, John Lonsdale said, and I kind of agree
with him, and I think that's what the economist was
saying in that the Trump Trump presidency has tail risk
(10:24):
and that tail risk is that you know, uh, the
policies that he'll enforce, you know, may not be good.
You know. The economists said, you know, regarding their endorsement
of come out Kamala Harris, that you know, she was
the safer choice, and I think she was the safer choice.
Trump is probably going to be feast or famine, and
of course we'll see, we'll see how that plays out.
(10:45):
The market is insisting that it's going to be a feast.
But I think the market reflected you know, and look,
you know, I mean, everyone has their own opinion. My
guess is the market reflected more that there wasn't a
legitimacy question as to who won the election. Kamala Harris
got got beaten pretty sallely. Who knows if it was
a lot closer, whether she would have contested it, I
(11:07):
don't know, but she didn't and because probably because she
did get beat so sally. And now it's in.
Speaker 3 (11:13):
The lower corporate tax rate as well.
Speaker 2 (11:14):
Yeah, I mean it's hard to it's hard to you know,
argue against the lower lower corporate tax shape being good
for the stock market.
Speaker 1 (11:24):
Some some of some of the sectors there technology since
the and this is Wednesday and Thursday's trading technology up
four point six four percent, leading the way. Consumer discretion
are at four point five to two. You have financials
up four point three seven. I'm going to give my
(11:45):
go ahead. No, no, no, go on. I am going
to say that has to do with less regulation. The
Biden administration and I assume the Harris administration would have been,
you know, look at it, look at tech. Are we
going to break up Google? Uh?
Speaker 3 (12:01):
Financial less regulation.
Speaker 1 (12:04):
Consumer discretionaries? Pretty much? Amazon is test Len's consumer discretionary
as well.
Speaker 3 (12:11):
It is. Yeah, I think it's the second largest holding
in the x L Y.
Speaker 1 (12:14):
So, so Elon Musk's in with in with Trump, you.
Speaker 2 (12:19):
Know, Jeff Bezos, I think too. You know, I think
a lot of people kind of played the middle this
this election, didn't want to go too far each way.
The Washington Post didn't endorse anyone. You saw what, you know,
Elon Musk did attach himself to to to to Tessa.
You had, you know, Mark Zuckerberg congratulate you know, uh,
you know Donald Trump.
Speaker 1 (12:38):
So did Jeff Bezos. The Post odds with the first
Trump administration pretty pretty heavily.
Speaker 3 (12:44):
So I think, you know, the you.
Speaker 2 (12:46):
Know, the the the tech uh, you know, giants that
you know, we're once kind of the people that Trump
haters hated, Trump supporters hated the most, are now kind
of Trump allies. So they've they've kind of shifted, which
would be good, I guess for their companies. And you know, yeah,
you know, healthcare is up point eight five percent. It
(13:07):
looks like industrials up three point two nine percent.
Speaker 1 (13:11):
Energy up three point two eight So so we can
see industrials up.
Speaker 2 (13:15):
Odd thinking with with energy, if if we're going to
drill more, drill more and become energy independent, that could
bring the call, bring the you know, the price of
energy down. But you know it also, hey, maybe we're
we don't regulate energy companies as much either, so you know,
it could be good for I guess, you know, margins
for these energy companies.
Speaker 1 (13:36):
And I think energy companies also have a if you
think about the past administration, Yeah, in the first couple
of years, two or three years, it was hard to
get any type of permits. But in the second year,
in the not the second in the second half more
so in the past year and a half or so,
(13:57):
we are drilling more than ever. But but these companies
have been self regulating. They don't want the boom and bust. Yeah,
there's that, and I think the Trump administration is conscious
of that. And also you look at OPEK and OPEC
plus having some influence there as well. And I think
President Trump, the Trump administration, second Trump administration wants to
(14:19):
open up energy, domestic energy production to foreign countries. So
I think that's why you had that uplement. It was
also sold off quite a bit coming into the election.
Speaker 2 (14:31):
Yeah, energy has had a weak year all around. Xxon's
had a good a good year, so it's kind of
helped the xcely because it's such a large percentage of
the XLA. But you know, you're to date the you know,
the XCEL is up thirteen point seven seven percent. You know,
it's three month is up seven and a half, so
half of it is in the last three months, and
(14:51):
I think, you know, it's quite a large percentage of Yeah,
twenty two point sixty one percent is Exon and fifteen
percent of Chevron, so you're looking at almost you know,
three thirty eight over thirty eight percent of the XL
being those two companies.
Speaker 1 (15:05):
So those are some of the halves industrials. You know,
the whole concept of bringing uh production home that have nots.
I think have some of the have nots. Consumer staples especially.
Speaker 2 (15:20):
Had a rough day post election, and I think that
has to do with yet tariffs. You know, a lot
of the you know, the goods being bought at Low's
are are manufactured foreignly foreign, and you know that could
that could impact Loew's earnings a little bit.
Speaker 1 (15:35):
But also in inflation there there's also if we're going
to get back into a higher growth economy, and again
growth was decent during the Biden administration, inflation adjusted growth
not so much as we all know, and probably why
one of the reasons Kamala Harris was not elected was
that inflation adjusted growth world feeling in our pockets and pocketbooks.
(15:56):
But so I think they're consumer but let me it's
a consumer state. Is also the fact that if we're
going to accentuate growth, man, we're back into tech, we're
back into consumer discretionary, we're back into industrials, we're back
into materials, and consumer staples is more of a place
to hide down one point two seven healthcare, the predictability
of earnings a place to hide, you know, up only
(16:18):
point eight five percent. So I think those were reflected
not as much with interest rates staying high, but more
so with Man, if we're going to grow our way
out of the debt and deficit, we're we're we're gonna
do it with our technology. We're gonna do it with production.
We're gonna do it with those things. So we don't
need to hide in consumer discretionary. We don't need to
hide in and I'm sorry, consumer staples. We don't need
(16:40):
to hide in healthcare.
Speaker 2 (16:41):
And over the next five to ten years, I think
that I think that one of the only ways to
do this is is is to embrace this let's say
technological revolution, whether it be AI, whether it be space.
And I think that I think that that's our you know,
chance uh to really grow away out of this is
(17:02):
create new sectors that maybe weren't here five or ten
years ago.
Speaker 1 (17:06):
And then so yeah, and you see that really in technology,
the performance is the number one performer, which which really
flew in the face of rising interest rates. We can
think of rising interest rates, the mantra back in twenty
twenty two was sell tech. As interest rates go high
or secular grows, will have a more difficult time making headway.
They've done the best over the first couple of days. Again,
(17:27):
this may all change next week, but I will so
the four laggards, two of which we mentioned, consumer staples
and healthcare, we're both more Hey, we're gonna opt for
growth companies. I think I think individuals are making a
mistake with healthcare because deregulation, you know, or less regulation.
Speaker 3 (17:44):
We'll also see that a little bit. You know, U
n H was up, sign was up dancially.
Speaker 2 (17:49):
You know, it's five day performances eight point five to
five percent.
Speaker 1 (17:52):
So how about you and H.
Speaker 2 (17:54):
I'm saying U n H is eight point five five percent, Yah, yeah,
that's you know, five day is up two point three percent,
so not as well, but so yeah, I think you'll
maybe maybe healthcare won't be on the on thes as
much as as and this administration as opposed to you know,
(18:15):
inherits administration that would maybe implement more whatever regulations, regulations
within that sector.
Speaker 1 (18:26):
And then utilities down point eight six percent, in real
estate down one point four to six percent. Yeah, these
are these are all the select sector spiders, you know.
The guest there is uh basically just interest rates sensitive
areas that will will not do as well, you.
Speaker 3 (18:42):
Know, I guess, you know, with six minutes left. That
moving on a little bit.
Speaker 2 (18:48):
I think if if you look at you know, I
have this right here, Trump on issues. It's from MFS
Trump GOP appeers headed for sweep and talks about taxes.
How you know you'll see a proposed Lauren Coper tax
rate to fifteen percent from twenty one percent for domestic manufacturers,
you know, trade ten to twenty percent, universal baseline tariff
on US imports, sixty percent tariffs on all Chinese imports,
(19:09):
as well as tariffs on certain auto auto imports from Mexico,
so maybe even American companies bringing manufacturing back home. I
think that's obviously a goal labor and immigration Trump aims
in part, and I think that's one of the this
is one of the biggest risks to our economy over
the next ten years is let's say a mass deportation
(19:31):
of immigrants, and it would be inflationary to the US
economy as it would probably.
Speaker 3 (19:39):
Drive up wage growth.
Speaker 2 (19:41):
So you know, I think a lot of people said, hey,
you know, I'll take some inflation for you know, some
better paying jobs for the lower for the lower class.
And I think you saw that just by the voting
numbers for lower income Americans. They said, hey, you know,
although we might have some inflation, you know, at least
all get paid a little bit more. So you'll have
that shrinking labor supplies, you know, a possibility of reduced
(20:04):
economic growth as although you might say, you know it's
it's good for America as a whole. You know, immigrants
do spend money, which helps with GDP.
Speaker 3 (20:16):
So you know, I think I think that this first
half is.
Speaker 2 (20:21):
You know, kind of characterized by this is this is uh,
you know, a feast. This will be a feast or
fam in four years, and this is I think a risk.
I think that's the risk.
Speaker 3 (20:34):
Uh. You know a lot of the American people are
willing to take.
Speaker 1 (20:38):
Yeah, and the market and you the gurd job is
to kind of figure out the holes that allow our
clients to continue to move forward.
Speaker 3 (20:46):
You know.
Speaker 1 (20:46):
Certainly, when the market goes down, our client's portfolios go down,
because that's what correlation means. However, you know, I think
as the markets I think are signaling positive positive results
from the Trump administration, and I certainly don't blame them,
(21:07):
I think that as we move out one, two, three,
four years, then Trump's policies become more ingrained, and you
want to make sure that he make sure that what
you mentioned tariffs as an issue. Deportation is costly and
you can wait as benefits, but also cost a strain
in the labor market if.
Speaker 2 (21:25):
You and I'm talking a lot more about you know,
you're seeing declining birth rates in the United States, you know,
with with mass deportations. Look at the Japanese economy over
the past thirty years, Look at South Korea, look at China,
look at Turkey. You're seeing these massive declines in population
which which in turn leads to stagged and economic growth.
(21:49):
So you know, that's obviously just probably going to be
a concern. Maybe not now, but in ten fifteen years,
when are when my children are entering the.
Speaker 1 (21:59):
Late well even in two or three years, when when
you think about the money spent and look, I think
I think we all and both the right and the left,
can sit back and say immigration is a positive for
the country. I think it's a question as to what
level and how regulated it should be, you know, And
I think that's up to the politicians today.
Speaker 2 (22:19):
And I think the Democrats were scared to even breach
the issue.
Speaker 1 (22:25):
Yeah, or didn't have a lect a standard really over
the past three or four years, you know, and or
didn't have didn't have one that resounded with the American public. Yea,
you know, they they chose to focus on other things.
So that's that's what we have going for. So good
two days for the market. You know, markets opening up
kind of flat this Friday. Uh, we are we you know,
(22:47):
one of the things. You know, So Warren Buffett has
raised a lot of cash for whatever reason. Maybe he
was concerned about the economy, Maybe he was concerned about
the election, Maybe he was concerned about capital gains, tax
rates going up. Maybe he just wanted to do that.
You know, I don't I don't really know exactly what happened.
Alls I will say that is, you know, even Warren
Buffett can't time the market. So our when we when
(23:10):
we uh, when we plan for our client's future, it's
regardless of the president. We look mostly at his or
her policies that will impact those plans and then how
they play out, because nobody knows, you know, how they're
exactly going to play out.
Speaker 2 (23:26):
Uh.
Speaker 1 (23:27):
The mark was up about fourteen percent a year during
this past Biden administration, was up a little less than
that under the previous Trump So our clients did well
under both, you know, as we come into the last
couple months of the year. Uh. The market you know
during election year three point three percent with positive returns
seventy five percent of the time since nineteen ninety and uh,
(23:49):
and so it bodes well for the rest of the
year after that, we regroup and go from there. Right now,
it's ten thirty on the station depend Upon for news,
weather and information. News to K ten and one O
three one w g Y and welcome back to the
second a half five of the Capital District's Money and
Investment Program. You're listening to the Fagan Financial Report from
Denis Fagan, sitting here with my son Aaron, as we
do every Sunday right here in New Stoke ten actually
it's Friday, about noontime. We record the show usually on Fridays,
(24:13):
and then do the first half, take a little bit
of a break, and then do the second half. And
right now, the markets having a good week, having a
decent day, holding on to those post election gains that
it also added to those. He looked at the NASA composite,
the S and P five punted at the total market
in the next closing at record highs on Thursday, and
(24:36):
right now are above those record highs. At the close
today they're at the inter day highs now as the Dow.
They're talking a little bit before the break about you know,
how the market does. You know, for all years since
nineteen ninety this is according to Bespoke, the meeting gain
has been three point three percent with positive returns twenty
five out of thirty four times, and that is a
(24:59):
full for the equity markets from election day to the
end of the year. For the S and P enter November,
the year to date gain of twenty percent plus it's
averaged the further gain of five point four percent in
the final two months of the year. So there's a
little bit more information over the last fifty years from MFS. Again,
(25:20):
the Dow Jones industrial averages average again of two point
zher one percent in November with positive return seventy two
percent of the time. It's the best election year since
nineteen thirty six with twenty one point nine percent gain
through ten thirty. Obviously, elections, you know, and they're just
the presidential election year, so only every four years and
(25:40):
so on and so on. You know, is this risk on.
We talked before the break about the largest or not
the largest sector of the best performing sectors, and since
the election, again it's only been two or three days.
It's risk on. You know, it's risk on. It's technology consuming,
discretionary communication services risk go off. You know, healthcare risk
(26:04):
go off, real estate risk off. Utilities that are two
of those three are down, and then healthcare being up.
Speaker 2 (26:13):
Yeah, I mean, I think that you have to assume that,
you know, the risk on trade would be there a
little bit now that Trump has been elected. I think
what you got through is a little bit of the
possibility of some contention during the election because the margins
were so gray in Trump's favor. You have corporate tax
rates getting cut. So I think, you know, I think
(26:36):
at first glance, you know, you got through the unknownst
of the next few months.
Speaker 1 (26:41):
You know.
Speaker 3 (26:41):
I think once we hit the next.
Speaker 2 (26:42):
Year, I think we'll start to see what policies Trump has,
what the ones that he prioritizes, and then I think
the market will shift based on that. But I think,
like on both sides, you heard a lot of rhetoric
that that who knows how much and how serious that
rhetoric was and what parts are more serious.
Speaker 3 (27:04):
Than the others.
Speaker 2 (27:04):
So now I think, you know, it's kind of like
an at first glance look at the market, and I
think signs are positive with Trump being elected. You know,
you got over the first unknowns. The next unknowns will
be tariffs, how much tariffs, who gets, what countries get tariffed?
Speaker 4 (27:30):
Forel Yeah, foreign policies, whose cabinet is you know.
Speaker 3 (27:34):
You know what happens in Russian Ukraine. So but I
think for now.
Speaker 2 (27:39):
It's the rest of the year forecast is pretty unfavorable
towards the equity.
Speaker 1 (27:46):
Market, you know. But I think we both feel like
I've been doing this forty five, forty how many years? Yeah,
forty one years and forty yeah, forty one years, and
I think every think it's like it's like what it's said,
stop the music. You know, everybody's walking around the chairs.
(28:06):
Nobody wants to be left behind this year for some reason.
You know, the end of the year is like, Okay,
we start over again, and we see how we did
at the end of the year. But in reality, it's
not really that really a you know, everybody begins to
diet on Monday. Everybody you know these breakpoints that people
look at, but and I don't know why that's the case,
or someone will say, hey, I'm retiring, should I change
(28:27):
my asset allocation? I don't know. A month ago you
still kind of had the same thing because now you
need you need the money for for income. But I
guess my point is that you know it's gonna it's
it's it's a tail wind to the market, you know.
Right now, I think it's nobody wants to be left
out of the loop. Nobody wants to be left out
of left out of the risk. And if the market's
gonna keep going out up to the end of the year,
(28:47):
but at some point in time, someone's gonna say, up,
I'm gonna you know, it's the music's gonna stop, and
it's gonna be like, I want to book these profits
and close out the year because it's been such a
good year and.
Speaker 3 (28:56):
I don't know.
Speaker 1 (28:57):
Maybe maybe it won't happen. Maybe it will, but don't
yourself open to think that it won't. On the other hand,
you look at Warren Buffett probably worried about whatever we
mentioned in the first half. Was he what was he
worried about the election? Was he worried about the market.
Is he worried about just trying to capital gains, tax
rates going up, whatever, And he got out of some stocks,
you know, I'll be at much lower prices. Look at
(29:17):
Back of America's got to be up five or six points,
maybe you know, fifteen or twenty percent from where he
was selling it. So regardless of where the market goes
over the short term, you know, as I was saying
in the first half, we allocate assets for the long term,
regardless of whose presidents and then look at policies that
that that he or she he in the past has Uh.
Speaker 2 (29:38):
And I also came up with him he has from
twelve point eight to forty nine point three percent cash
from the first quarter first quarter, so uh, you know,
let me just read this again. Apple steak slash by
another twenty five percent. That's down twenty five percent. Basically,
you know, Warren Buffett is slashing it is raising cash,
(30:01):
and you know he usually does it around elections. But
I think you also have to you know, look what
happened this year with just insurance carriers, and twenty five
percent of of Berkshire's Hathaway revenue is insurance companies. So
I think insurance companies have to have more cash available.
So now I think everyone wants to say, oh, warm
(30:22):
Buffet's raising cash for this reason or the markets at
at hies. But he has a different agenda for his
companies and his cash than you know, the typical American
American does that. That is investing too, So I think
that's you know, important to differentiate.
Speaker 1 (30:37):
And I yeah, and I agree. And I also we
have to see where capital gains tax goes. I doubt
they're going to go up, like we said in the
first half. But let's talk a little bit about jar Powell,
who the Wolf of Wall Street. You know, that was
one of the interesting questions yesterday. Powell was asked if
he would step down from his position if present, like
(30:59):
Donald Trump asked him to. When he said no, I
mean literally, he just said no. And later on another
porter asked him if the if the if the president
had the power to fire demote him, and Pouel said
that was not permitted under laws. It was like Leonardo
DiCaprio and the Wolf from Wall Street. I'm not leaving.
I'm not leaving.
Speaker 3 (31:15):
So and you know, no, I think he should.
Speaker 2 (31:17):
I think you know, the the the good thing about
a democracy is checks and balances. And you know, I
think a good business owner or a good leader doesn't
just surround himself by people that agree with him.
Speaker 1 (31:29):
So look at right, look at those that do that's
the case. You know, you want checks and balances, yea, yeah, yeah, yeah.
Speaker 2 (31:36):
You don't want to be, you know, the smartest in
the room on every subject. You want to listen to
people that know more about you and on specific things.
And I think that's probably one of you know, you
would have to think of one of Trump's maybe fault is,
you know, firing people that don't agree with him, and
I don't think that's the right course of action. I
think Powell maybe stumbled a little bit coming out of
(31:58):
the gate with the trans jub you know and inflation
being transitory, which I obviously hurt the account. But I
think he's done quite a good job to past year
and a half, two years really with with getting inflation
under control, with this soft landing. You know, we saw
a twenty five basis point cut hike on that Wednesday,
Yeah yeah, cut cut on Wednesday.
Speaker 3 (32:19):
And he's doing a good job.
Speaker 1 (32:22):
He was also, uh, he talked a little bit about
you know, the federal So so the FED deals with
we'll keep probably should keep going down monetary policy. But
the FED also deals FED deals with monetary policy, interest
rates and the like, you know, and money supply. The
(32:45):
federal government, Congress, in the in the in the administration
obviously deal with legislative things, including tax policy, fiscal policy.
And I think when President Powell or char Poll was
asked about the rising deficit and he responded to federal
government's fiscal path, fiscal policy is on an unsustainable path.
(33:05):
The level of our debt relative to the economy is
not is not unsuitable. The path is unsustainable, so I think,
and we see that in a very in a very
large deficit, you're a full employment and that's expected to continue.
So it's important to be dealt with. It's ultimately a
threat to the economy, you know. I think one of
the things is that you know when you run when
you run a large deficit. And I think this is
(33:26):
part of the reason maybe why Trump, why Donald Trump
was elected re elected is I think, and this is
contrary to what a lot of organizations have found that
you know, they find that President elect Trump's uh economic
policy will add more to the debt than Kamala Harris
is one. But that said, I think one of the
(33:48):
reasons President Trump was elected is you know a lot
of people probably didn't know that and maybe or didn't
believe it. But also that you know he has President
Elect Trump had more growth oriented policies there. But that said,
you know, if the deficit keeps trying is and it's
not gonna matter till it matters. And I think right
now we are the key continued to look at where
(34:13):
interest rates go because interest rates generally speaking, will trend
down after a rate cut, and they've kind of they've
gone out. They went up certainly after the last fifty
basis points and right now we'll see what they do
after this twenty five basis point cut. But I think
that's that's one of the keys with our economy is
what's gonna what's going to go on with interest rates.
There's some concern that, hey, the Fed may be losing
(34:35):
control of the bond market, you know, yeah.
Speaker 2 (34:37):
And I think that on average, we are our outstanding
bonds are about three point We pay about three point
four percent to those to those treasury holders. And I
think that fear is that tariffs will cause inflation to
remain high, which will then in turn make the fed
(34:59):
head have to have rates remain high, which would just
balloon our financing costs as a country.
Speaker 3 (35:09):
Then you would lose then you could possibly lose.
Speaker 2 (35:11):
Some faith in in in the US currency, and and
and that would just continue to balloon and and and
have you know those interest rate rate payments with three
point four to three point five to three point six.
I'm not too worried about that yet. But you know,
we haven't seen the effect that the that these proposed
tariffs does have on our economy and inflation. So I
(35:35):
think that's that that's a huge unknowns. And I think
the last time we had major tariffs like this was
I don't propose like this was at least fifty brought
us you know, that brought us obviously brought us into
the not obviously, but brought us into the Great Depression.
And you know, being a manufacturer way more of a
(35:56):
manufacturing based economy in the twenties and now where you know,
obviously more of a service based economy, there's not that
much back testing we can really do. So I think
that will be another unknowns that could arise next year,
that could maybe make the market a little bit more volatile,
because you know, I think, as we just saw this
past week, is the market just wants to see the
(36:19):
direction that we're going. And the more the economy is going,
the more certainty to that, the more the less volatile
the market is, and the happier people are, and I
think the easier it is to invest in different sectors
and in the stock market. So now, the market doesn't
like unknowns, and we always talk about that. I think
that's the biggest unknowns is the effect that tariffs do
(36:42):
have on inflation in our economy overall.
Speaker 1 (36:45):
Yeah, but you know, you're relying on President Electromp to
apply them in the appropriate manner, and you know, assuming
that he will yea and we'll see how We'll see
how that goes. You know. Paul also talked about monetary
policy still being restricted. Mean it's interest rates are still
too high. We think that even with today's cut, policy
is still restrictive. So that means, you know, depending upon
(37:08):
the data. The FED always talks about being data dependent,
interest rates will keep coming down. Uh, and uh, there's
some debate as to whether or not they should. You know,
I wouldn't mind seeing a pause in December.
Speaker 3 (37:21):
Yeah, me too.
Speaker 1 (37:22):
I think it would be you know, it'd be good
to see. Uh, you know, because the other thing, too,
is that there could be a shock to the system,
whatever it may be, you know, geopolitical, economic, most likely economic. Yeah,
you know, something happens to the economic system, our economic system.
You know, China invades Taiwan, who knows something that Israel
(37:44):
decides to blow up the Iranian oil fields, and and
and the the mid Middle East blows up and oil
goes way high. So, uh, Powell in the Fed want
to keep some dry powders. So although they are restrictive
relative to inflation based upon historical measures, it's not a
idea because the economy is doing pretty well to kind
of say, okay, let's let's keep let's keep interest rates
(38:05):
right here. The odds are good they're gonna cut in December.
But you know, I would not I would not be surprised,
nor would I be adverse to them. Just kind of
like using December and say, you know what, we're gonna take,
you know, one more month and churn this out again.
In January.
Speaker 2 (38:21):
The consumer continues to be strong. You did see PCE
up two point one percent, year over year in September,
which was the lowest reading sense February of twenty twenty one.
Speaker 3 (38:32):
So you are.
Speaker 2 (38:33):
Seeing, you know, maybe a little bit of a weakening economy,
but but a strong consumer. So I think it's I
think it's a decent I think it would be a
decent idea to pause then and then see what happens
at the beginning of next year and with with the
new administration.
Speaker 1 (38:49):
Let me see what else I can get out of here.
Central Bank's not in any preset course well positioned to
handle risk. Trump election has nothing to do with the
Fed out look, and that is about it. But they
did cut to the target range, went from five excuse me,
(39:09):
four to seventy five to five percent down to four
p fifty to four to seventy five percent with the
federal funds rate, and obviously the prime prime rate came
down along with that a couple of things. We probably
got eight or nine minutes to go one of the
(39:30):
and we stayed out of it. You know, there was
I forget who it was, David Tepper maybe who's a
big investor, looked at China and some of the stimulus
they were providing and invested in China. Generally speaking, we
don't invest in China just because it's just so opaque
their financial system. That and it's dominated obviously it's not
a democracy, so you know, you really have government type
(39:54):
of directed or orchestrated fiscal and monetary power. See you
see where that's gotten China really, I think, yeah, yeah,
they're having they have troubles now and how they handle COVID,
you know, companies and are moving to other countries, specifically
India and and they're dealing with But but god, did
(40:15):
you want to say something. They did announce at one
point for a trillion dollar package of just kind of
like shuffling dead around from you know, the the broader
government to more two more local governments. But but it
really wasn't a stimulus package. So the Chinese market's still
kind of like stumbling about on unemployments high You mentioned
(40:36):
it earlier about a declining population or a stagnating population.
It's not growing anymore, and then home prices are they
are declining to the tune of seven or eight percent
uh year over year as of the September numbers.
Speaker 2 (40:50):
Yeah, I think China is obviously as influential, you know,
being what about twenty percent of.
Speaker 3 (40:54):
Of GDP UH Global GDP Global GDP.
Speaker 2 (40:59):
But I think, as you said, we're you know, just
as investors, you know, we can't we specialize more in
US centric companies, and it really has worked out for US,
especially the past fifteen years. And I think what the
United States has that other countries don't have is the transparency,
the innovation, and the reliability of the US currency. So,
(41:23):
you know, do I think that emerging markets could outperform
at different points in time?
Speaker 3 (41:30):
Maybe? Maybe?
Speaker 2 (41:32):
Yeah, I just don't find I think you invest in
what you know, and that's kind of what.
Speaker 3 (41:38):
I think about China.
Speaker 2 (41:39):
I think, you know, we we're better at valuing and
investing in US companies and I think they are the
best in the world, and you know, China is just
so opaque that it's hard to really invest in them.
Speaker 1 (41:52):
Yeah, So you know, if you want to look for
alternatives to that investing in China, you know, I would
look at you know, what's where it's the v O,
which is the Global x U S is that vt
O or from from Vanguard?
Speaker 2 (42:09):
I'm not sure, you know, oh yeah, the vt is
a total world stock ETF.
Speaker 3 (42:15):
I don't know if there's one.
Speaker 1 (42:16):
X A CWX is another one that's an international SHG,
which is an emergent market ETF. I guess what I
would say is that I would think that, you know,
investing in China directly is not for the faint of heart.
Speaker 2 (42:31):
Yeah, and you know, VT the Vanguard Total World Index
is only three percent invested in China. I'm seventeen point
nine in Greater Asia, but the bulk of that is Japan.
Speaker 1 (42:43):
That's interesting, Yeah, what do you know, what do you so?
So where do you where do you allocate assets? Now?
If you look at the rally that we've had this year,
if you look at domestic versus overseas, you know, dead
(43:05):
versus versus equities.
Speaker 2 (43:07):
With how well, let's say that the triple qs have
done like large cap tech has done the past fifteen years.
Speaker 3 (43:14):
You know, I don't think that just because.
Speaker 2 (43:19):
This government administration will be a little bit more favorable
towards the larger tech companies. Like if you just look
at the QQQ, it's five day performance is up five
point six six percent, which is you know, obviously a
lot especially in five days, you know, and it's one
month performance is you know, up six point five two percent.
(43:40):
So you know, it really took off when Trump's odds
uh to to to win the White House went up,
that said, you know, these are these are obviously the
most innovative companies in the world, but I do still
think that, uh they could underperform relative to mid cap
and value stocks that have underperformed over the past ten
(44:01):
or fifteen years so greatly.
Speaker 3 (44:03):
So I think we.
Speaker 2 (44:05):
Have an economy and a stock market where stocks can
continue to work. It's just a lot of these stocks
that have kind of struggled over the past ten or
fifteen years. We'll start to really adopt these technologies. With midcaps,
you'll have a little bit of a friendlier interest rate environment.
In value stocks, you know, I think that they can
increase their margins. It's a little bit friendlier of a
(44:28):
of a corporate tax rate environment, and I think I
do think it'd be a decent time to shift some
of your assets from larger cap tech to tou yeah,
more value, mid cap.
Speaker 4 (44:47):
Any any any specific specific which is a lot dividend Aristocrat,
ETF G J A V A is JP Morgan active Value.
Speaker 2 (45:00):
It's five days up four percent, so it's done really well.
It's a great fund it's up twenty point ninety two
percent as a value fund, which is really great compared
twenty point ninety two compared to you know, Schwab Value fund,
which is up eighteen point eight three year to date.
It's a little bit of outperformance there. We owned three
m for people, so something like that. I still like
(45:21):
the Johnson's and Johnson's of the world, So, you know,
I think that those are some opportunities to you know,
I think I think it'll be in the next five
years will be a good time to really diversify your
portfolio or maybe reallocate some of those assets that have
done so well and maybe has have gone outside of
your intended allocation just based on their performance, and broaden
(45:44):
out your portfolio a little bit.
Speaker 1 (45:45):
Well, the other thing we talked in the office a
lot about and when the market's rock and you get
calls from clients, you know, what are your objectives? Yeah,
you know what we're talking about that earlier today someone's
sixty five or seventy years old. You've gotten to this point,
you've gotten into financial strata, this financial comfort zone. You know,
do you want to move up to another financial comfort zone?
(46:07):
Everybody does, But what's the risk if you you certainly
don't want to move out. So I think that's kind
of what you're saying, is that you know, the market
over the past five ten years has brought a lot
of people where they are going to be comfortable for
the rest of their life.
Speaker 2 (46:25):
Yeah, you know so, and they get rich phase of
your life and wealth accumulation phase of your life is over.
If you're sitting five more than ever, you know, it
is those companies that did so well for you. And
I think that's funny in that you've seen such a
shift towards even in my fourteen or fifteen years work
and here you've seen such a shift, and you know
(46:47):
what you compare yourself against and now it's the S
and P five hundred. But you know, we always talk
about the S and P five hundred being forty percent
in consumer discretionary and technology. That I don't know if
that's the place you want to over allocate yourself. Uh,
if you are in retirement now, I think I think
(47:08):
it'd be a decent time to, yeah, broaden out your
your your portfolio, reduce your risk, reduce the volatility. You
take advantage of a higher interest rate environment, and we.
Speaker 1 (47:19):
Use term specific treasury E T F S I B
T L I B T H I B t j
I B T O UH, the A G G. We
use p f F, which is a preferred stock index.
We use the Vanguard Wellington Fund, which is a good
balanced fund. Use b n D which is the Vanguard
Total Bond. In next, we use some JP Morgan Income Fund.
(47:42):
So those are some things that you should look at
when you're when you're building your portfolio. Is that come up,
come up with an asset allocation that works for you, you know,
given your current situation, and and then go from there.
So it's so, I guess in all and all it was,
it was. It was an exciting it was it exciting
leading up to the election. It was an exciting election.
(48:06):
Certainly half of us Scott what we wanted and half
of us Scott what we didn't want. But we're all
pulling for President Elect Trump as Americans, and we all
should be. And then we just go from there and
see how it plays out. Am I worried? Yeah, I'm
worried because I think the tail risk can read the
economists the interview with the economists from the Economist to Magazine,
(48:29):
there's a tail risk to Trump, you know, and he's
he's going to do more unconventional things. He's done them
in the past. He won't have another term to worry about,
so so you never know, but we wish him well
and then the market is off to a good start.
Thanks for listening, and'll talk to you next week.
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